Robinhood is launching a cash management feature less than a year after blowing the launch of a similar product so bad Congress got involved
- Robinhood, the online brokerage that rose in prominence thanks to its no-fee trading, announced via its blog on Tuesday that it is launching a cash management product that will offer 2.05% interest.
- The news comes less than a year after it unsuccessfully tried to launch a similar product that was shelved after it was incorrectly promoted by the startup as being SIPC insured.
- Under the new feature, uninvested cash will be sent to program banks where it will be FDIC insured.
If at first you don't succeed, try again.
Robinhood, the online brokerage that skyrocketed to fame by offering zero-commission trading, is taking another stab at offering a place for customers to park cash.
The company announced Tuesday on its blog it would be opening up the waitlist for Cash Management, a place where customers' uninvested cash could earn 2.05% interest.
In December, Robinhood announced plans for a checking and savings service that would offer 3% interest and be insured by the Securities Investor Protection Corp. However, shortly after the announcement, SIPC pushed back, stating it would not insure the cash in the accounts and had no dialogue with the startup prior to the announcement.
Shortly thereafter, Robinhood announced it would shelve the project.
In July, Business Insider reported Robinhood's decision to announce the product was insured despite not checking with SIPC beforehand was a deliberate one.
"We announced plans in December to launch a new product. We made mistakes with that announcement, which led us to hit the reset button and start over from scratch," Tuesday's blog post read.
With Cash Management, uninvested cash will be moved to program banks, which will offer insurance from the Federal Deposit Insurance Corp.
The news comes just one day after announcing on the same blog that former SEC Commissioner Dan Gallagher would join Robinhood's board of directors.
Since Robinhood's initial failed attempt, cash management offerings have become the norm among robo advisors and trading apps. SoFi, Betterment, and Wealthfront are among several startups that have offered features where customers can receive higher-than-average interest rates.